Minnesota Restaurant Association survey on minimum wage increase

ST. PAUL — Results from a statewide survey of Minnesota restaurant owners and managers shows that restaurants, their employees and customers would be negatively impacted by a minimum wage increase that does not account for tips.

The survey of 115 members of the Minnesota Restaurant Association (MRA) found that if a minimum wage increase passes without considering tips as income, 90 percent of restaurants would increase menu prices, 77 percent would reduce staff hours, 69 percent would postpone making investments in their restaurant and 59 percent would hold off on hiring additional staff.

MRA is supporting a balanced alternative minimum wage proposal that would protect well-paying tipped jobs, reduce the pressure to increase prices, and continue the viability of table service restaurants. The proposal would establish a new tipped employee minimum wage tier.

In addition, MRA is working to strengthen restaurants and support restaurant employees by working to apply the manufacturing equipment sales tax exemption to restaurant equipment, eliminating the sales tax on free or reduced-price employee meals and complimentary beverages, and making health inspection fees across the state consistent and fair.

“Minnesota’s restaurant and hospitality industry is the second-largest employer in the state,” said Dan McElroy, executive vice president of the MRA. “Restaurants provide tens of thousands of good jobs across every part of our state. We are concerned that a minimum wage increase without considering the impact of tips would seriously impact our ability to maintain and grow restaurant jobs, hurting the very people a minimum wage increase is intended to benefit.”

The vast majority of restaurants in Minnesota who employ staff at the minimum wage pay those employees the federal minimum wage of $7.25 per hour, rather than the state minimum wage of $6.15 per hour, because most restaurants engage in interstate commerce. Most dining establishments pay well over the minimum for all employees, including kitchen staff.

In 2012, the Minnesota Department of Labor reported statistics on minimum wage workers. They found that about 122,000 hourly workers were employed in Minnesota’s eating and drinking establishments. About 42,000, or 35 percent, of these were paid the minimum wage. About 45 percent of all workers paid the minimum wage work in eating and drinking places, by far the largest percentage of any industry reported. Among hourly workers, those in eating and drinking places were the most likely to receive overtime, commissions or tips. The study reported that 53 percent of hourly workers in restaurants have these additional earnings.

MRA surveyed members in the fourth quarter of 2012 regarding tipped employees, including servers, bartenders and delivery drivers. That survey found average total earnings per hour for tipped employees were:

• $18.24 per hour statewide

• $22.11 per hour in the Twin Cities metro area

“For well-meaning lawmakers who want to see working men and women earn more than $7.25 an hour, I have good news – we’re already there,” said David Burley, co-owner of Blue Plate Restaurants. “Our servers earn more than $24 per hour, including tips. A mandated minimum wage increase that would benefit our highest paid employees will hurt our ability to compensate other staff, force layoffs, and prevent future growth that would include new hires.”

The proposal, House File 1255/Senate File 1447, would create a new minimum wage tier for tipped employees. As long as a tipped employee earned at least $12 per hour including tips, their base minimum wage would remain at the current level of $7.25 per hour. If an employee failed to earn at least $12 per hour during the pay period, they would receive the new minimum wage level passed by the legislature.

“Tips are already treated as income in Minnesota for all purposes other than the minimum wage,” said JJ. Haywood, CEO of Pizza Luce and President of the Minnesota Restaurant Association. “Employees pay taxes on them and employers pay Medicare, FICA, and unemployment compensation based on income including tips. The Minnesota Restaurant Association’s proposal is a balanced and reasonable idea that helps restaurants maintain well-paying tipped jobs and opportunities to grow.”

Minimum wage bills are currently under consideration in the Minnesota House and Senate.